Press Release

Software AG: The Integration and Process Software Business (BPE) Continues to Grow

BPE product sales were up by 17 percent (21 percent at constant currency)

Earnings turnaround in the IDS Scheer Consulting division

Full-year forecast: Product revenue and earnings growth confirmed

Darmstadt, Germany, 10/18/2011

Software AG (Frankfurt TecDAX: SOW), after an initial consolidation of the financial results for the third quarter 2011, expects license growth in Business Process Excellence (BPE) of 37 percent (at constant currency) to €42 million (previous year €31.4 million). Growth in the product business (license and maintenance) was 21 percent, at constant currency rates, amounting to €84 million (previous year €72.1 million). This growth demonstrates the strong dynamism of the market for process optimization with both products and services meeting strong demand. This demand was evident in many countries. The largest increases in sales were reported in North America, Germany, Australia and South Africa.

Sales of software licenses across all business areas improved by 7 percent to €75 million (previous year €69.6 million) or 11 percent at constant currency. With total maintenance revenues stable, Group product revenue (licenses and maintenance) increased to €169 million (previous year €166.2 million), an increase of 5 percent at constant currency.

The strong growth in BPE license revenue more than offset the expected decline to €79 million in Enterprise Transaction Systems (ETS) sales (previous year €88.2 million). After the huge revenue increase in Brazil in recent years, business development in the region now follows a more normal path.

Software AG generated services revenues of €105 million (previous year €108.3 million) in the third quarter. Of this total, €63 million (previous year €60.5 million) were generated in the BPE and ETS services area and €43 million (previous year €47.8 million) by IDS Scheer Consulting (IDS). Software AG’s new services management team is focused on increasing profitability accepting slower revenue growth during this transition phase.

"The measures to improve the quality of sales, launched in recent months, have started to bear fruit. The turnaround at IDS Scheer Consulting has been successfully completed", said Karl-Heinz Streibich, CEO of Software AG.

Total Group turnover was € 275 million (previous year €275.3 million), an increase of around 2 percent at constant currency rates. The continuing strength of the Euro resulted in lower stated revenues of approx. €7 million as foreign currency sales are converted into Euro. Through a stronger focus on profitability in the services business, IDS Scheer Consulting successfully managed a turnaround in earnings in the third quarter and will significantly increase it contribution to results in the second half of the year. Overall in the third quarter, the Software AG group achieved an operating profit (EBIT) of approximately €71 to €73 million (previous year €69.1 million).

"As announced, we have continued the sustainable growth of Software AG in the second half of the year and continued to increase earnings and margin even in times of lowering macroeconomic economic indicators", commented Arnd Zinnhardt, Chief Financial Officer of Software AG.

Outlook
Software AG considers itself to be well on the way to achieving its ambitious full year growth targets in its core business, the sale of software licenses and maintenance. The ETS product revenue for the first nine months is 1 percent under the 2010 year level. This performance confirms the forecast for the full year 2011 of ETS product revenue within plus or minus 2 percent of the 2010 level. The BPE business division has, as of 30.9.2011, delivered 10 percent revenue growth at constant currency rates. There is strong customer interest in modern integration and process software and this is once more generating double digit growth, despite the macro-economic uncertainties. Therefore, the company confirms its product revenue growth targets for 2011 of 10 to 15 percent at constant currency

In the IDS Scheer Consulting business division the company will remain focused on strongly profitable projects. For the full fiscal year, this will have two consequences: first an expected increase in the EBIT margin of around 200 basis points to ca. 26 percent (previous year 24.0%); and second a total Group revenue growth of between 2 to 5 percent at constant currency. The profit after tax will therefore be 10 to 15 percent over the €175.6 million reported in 2010.

The detailed financial results will be published by Software AG on October 27, 2011.

About Software AGSoftware AG is the global leader in Business Process Excellence. Our 40 years of innovation include the invention of the first high-performance transactional database, Adabas; the first business process analysis platform, ARIS; and the first B2B server and SOA-based integration platform, webMethods. We offer our customers end-to-end business process management (BPM) solutions delivering low Total-Cost-of-Ownership and high ease of use. Our industry-leading brands, ARIS, webMethods, Adabas, Natural, CentraSite and IDS Scheer Consulting, represent a unique portfolio encompassing: process strategy, design, integration and control; SOA-based integration and data management; process-driven SAP implementation; and strategic process consulting and services.
Software AG had revenues of €1.1 billion in 2010 and has more than 5,400 employees serving 10,000 enterprise and public institution customers across 70 countries. Our comprehensive software and services solutions allow companies to continuously achieve their business results faster. The company is headquartered in Germany and listed on the Frankfurt Stock Exchange (TecDAX, ISIN DE 0003304002 / SOW).

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